This page introduces the concept of regional gross domestic product (GDP) statistics and outlines the scope of the Regional Gross Domestic Product information release. It includes an overview of sources and methods, some analytical uses, and potential extensions. See:

Background

The release is in response to current interest in regional economies, reflected in the addition of regional GDP to the list of Tier 1 official statistics. It supports Statistics NZ’s objective of providing the information New Zealand needs to grow and prosper.

We would like to acknowledge the assistance provided by the Ministry of Business, Innovation and Employment (MBIE) in initiating this update and providing additional funding to undertake the work.

Painting a coherent picture of New Zealand’s regional economies is not an easy task. A number of statistics and reports are available to assist with this.

Regional GDP complements the existing range of statistics and provides a yardstick for telling a comprehensive story of a region’s development. These resources should encourage greater regional analysis, and ultimately contribute to regional economic development.

What is regional GDP?

Regional GDP is a geographic breakdown of national-level GDP, which is New Zealand's official measure of economic activity and growth. GDP is a well-known concept and is frequently used as a headline statistic for economic performance.

GDP combines in a single figure, and with no double counting, all the output (or production) carried out by all the firms, government bodies, non-profit institutions, and households in a given area during a given period, regardless of the type of goods and services it produces, provided that the production takes place within the area’s economic territory.

Regional GDP presents the contribution and make-up of economic activity for the regions of New Zealand. GDP of all regions sums up to GDP of the total economy.

Sources and methods for measuring regional GDP

There are three different approaches to measuring GDP – the production approach, the expenditure approach, and the income approach. We use the production approach for deriving regional GDP.

The production approach to GDP measures the total value of goods and services produced, after deducting the cost of goods and services used in the production process. This is also known as the value-added approach.

Method as determined in the 2006 feasibility study

In 2006, we shared the findings of our feasibility study on the compilation of regional GDP statistics. The key finding of the study is that data and methods make it feasible to produce estimates of regional GDP using existing data sources and applying internationally recognised methods. Statistics for 2000 to 2003 were provided.

As part of the feasibility study, we also published a comprehensive sources and methods document. The same methods are used for compiling the current regional GDP statistics.

Research Report on Regional Gross Domestic Product for findings from the feasibility study.

National-level GDP

The New Zealand GDP statistics are compiled from a wide range of source data. These statistics are subject to revisions as more data becomes available over time. Once sufficient data is available for deriving all three approaches of GDP, the data is organised and confronted in a supply-use framework. This exercise is usually completed about two years after the end of the reference period.

The regional GDP compilation takes advantage of this detailed reconciliation exercise and uses some of the same data sources for deriving GDP for each region.

The ‘bottom-up’ approach

Deriving GDP for each region from source data rather than splitting the national-level GDP result is referred to as the ‘bottom-up’ approach. It is the internationally recognised preferred method for compiling regional GDP.

This approach directly measures the activity of local units. It is an analytically valuable approach as it links the activities of businesses within a region to the growth of that region. This approach is used for most industries.

The ‘top-down’ approach

The alternative to ‘bottom-up’ is the ‘top-down’ approach. For this method regional indicators are used to allocate national-level GDP estimates to regions. For some industries the source data currently available is not sufficient to use the ‘bottom-up’ approach and a top-down approach is used instead. Examples are the education, and non-residential property operation industries. This is usually due to a lack of unit level data, and typically top-down allocations are based on data from LEED or the Census of Population and Dwellings.

Dealing with data limitations

Care is taken to overcome shortcomings of the source data available. Very few statistics are designed by region and this can present challenges such as too few units being surveyed to give sufficient data for the region’s industry account. This can result in volatility at a detailed level. The level of industry by region statistics available is therefore less detailed than the national-level equivalent.

What is regional GDP useful for?

What is the size of a region’s economy? How much is each region contributing to the New Zealand economy? What is a region’s industry make up? How does the total region and industry make-up change over time? How does one region compare with another?

Regional GDP statistics add a dimension to the analysis of New Zealand’s economy. On the one hand, they help us to better understand the make-up and contributors to New Zealand’s economy. On the other hand, these economic statistics can be linked up with other statistics such as population and labour market.

It is also possible to compare individual regions with regions of other countries. This maybe be useful where regions have similar characteristics or to study the impact of different policies and institutional arrangements. This can inform debate and decision making of local and national governments, communities, businesses, and advocacy groups.

More timely estimates of regional economic activity

Regional GDP can be linked up with a range of other statistics and used as a benchmark for estimating more recent changes. Statistics NZ and other organisations provide a range of more timely but less comprehensive economic indicators than regional GDP. Some of these can be used to approximate broader measures of recent activity in some industries across regions.

For example, labour market statistics can be used to rate forward regional GDP by industry, which gives more up-to-date estimates. However, these methods all have shortcomings and cannot replace the framework and methods used for compiling regional GDP.

Extending the range of regional macro-economic statistics

Regional GDP is measured in current prices, which gives a measure of the market value (inflation not removed) of all relevant economic transactions during a year. This gives the size and performance of the economy. From these measures assumptions can be made about the efficiency of use of resources and the productive assets available. However, this analysis requires extensive modelling and any findings would be approximations only.

We have investigated options of extending the range of comprehensive and complex economic statistics by regions and found that further development of data and methods would be needed. For example, suitable regional price indices and labour input statistics are not available to derive regional productivity measures. We welcome any suggestions on how the statistics could be usefully extended, to help shape any future development initiatives.

Backdating and linking regional GDP

Backdated series 2000 to 2006

We derived the 2000–06 backdated regional GDP estimates at the industry level using a selection of methods, with the most appropriate method selected depending on the period and data availability.

For 2000–03, existing regional GDP published feasibility numbers released in 2007 were available based on the historic ANZSIC96 classification. We were able to ‘reuse’ the feasibility workings for a number of activities – mainly for those where the change to ANZSIC06 had little or no effect.

For 2005 and 2006, we analysed AES ANZSIC06 data as a basis for regional allocations and used it for a number of activities. For some activities, we used LEED gross earnings to derive regional ratios from 2000–06. Note that for some activities, LEED is a very good proxy for GDP, but for other activities its use is not suitable as a proxy.

For activities where we reused the feasibility estimates in 2000–03 and used AES data for 2005–06, there was a data gap for 2004. AES unit datasets on an ANZSIC06 basis were not available for 2004. In these instances, 2004 is generally estimated using regional ratios from the surrounding years. The 2004 allocation may be adjusted for large units that are important in particular regions. Where LEED data is used there is no data gap.

Feasibility study

The statistics that are available in Regional Gross Domestic Product are not directly comparable with the feasibility study results published in 2006. Back then, regional GDP by industry for 2000 to 2003 was provided, consistent with the national-level GDP statistics at the time. Since then, a number of changes have been made reflecting classification, data source, and quality improvements.